Voters in Phoenix on Tuesday rejected an initiative that would have closed the $2.2 billion Phoenix City Employees’ Retirement System and created a new 401(k) plan for city employees.
The initiative, called Proposition 487, was successfully brought to ballot by a petition in March by Citizens for Public Reform. Voters on Tuesday voted against the initiative 56.5% to 43.5%.
Proponents of the initiative pointed to the pension plan’s funding ratio as a reason to switch to a 401(k) plan. The funding ratio was 64.2% as of June 30, 2013, according to the pension fund’s most recent comprehensive annual financial report.
“Now that it’s failed, obviously we respect the will of our voters. We were not involved in the writing of this document,” Rick Naimark, Phoenix deputy city manager, said. “There were substantial legal questions about some of it and so now we’ll move on with the system we have.”
Among the legal problems with the initiative was that “we have a supplemental program that’s a DC program and this would have payments into that program by the city illegal,” Mr. Naimark said, “but those payment are part of the contracts with our employees.”
The city oversees a $1 billion 457 plan and $258 million 401(a) plan.